"In one frenzied month Treasury Secretary Henry Paulson and [Fed] chairman Ben Bernanke remade Wall Street. Along the way they may also have recast American politics. A month of historic government interventions shows signs of triggering a political version of climate change--unleashing a new era of class fury that could hurt U.S. companies, business leaders, and wealthy investors for years. 'A potential calamity,' predicts Democratic pollster Doug Schoen. 'If the reactions we're seeing hold, we could have real spasmodic anger directed at businesses and corporations.' ... By contrast, the implosion of Wall Street, followed by Paulson's escalating series of multibillion-dollar rescues, has fired up populist sentiments that were already building in American politics. ... White House spokesman Tony Fratto tried valiantly to get his message out to reporters: 'This is a rescue plan for the American economy,' he insisted. Despite the dire warnings of financial calamity from the White House and a few high-profile business leaders, much of Middle America wasn't buying the story that their own livelihoods were linked to the fate of the rescue package. Instead, average workers read the plan as the 'big guys bailing out their friends,' says former House Speaker Newt Gingrich. ... Morning talk-show hosts like Regis and Kelly shook their heads in disgust. Constituents in rural southern Illinois--a Republican district--phoned in their opposition to Congressman John Shimkus in a ratio of 200 to 1. ... Paulson ... banked on public fear of a financial crash; instead they ran into a fear from lawmakers who had to face down the folks back home angry at having to bail out Wall Street's masters of the universe. ... 'When an economy is overleveraged, it strikes me that investors are eventually going to be seeking a much higher return [from bonds and loans],' says Jared Bernstein, an Obama adivsor and senior economist with the left-leaning Economics Policy Institute. ... Even before this populist eruption over the Wall Street rescue, Middle America was souring on the privileged class. There has been a growing sense in the U.S. that a stagnant tide has kept the 80-foot yachts afloat while beaching the family outboard. ... Obama advisor Jacon Furman has calculated that the rise in the income of the top 1% of earners, set against the drop in income by the bottom 80%, is the equivalent of a shift of $885 billion a year. ... Former Arkansas Governor Mike Huckabee ... [said] 'I'm disappointed and disgusted with my own Republican Party as I watch them attempt to strong-arm a bailout of some of America's biggest corporations by asking taxpayers to suck up the staggering results of the hubris, greed, and arrogance of those who sought to make a quick buck by throwing the dice.' ... Gingrich argues that the rise in American populism is not a revolt against business alone but a revolt against all elites, including government and media elites. In his mind this is the age of the populist Andrew Jackson, not the socialist Eugene Debs. ... By this thinking, Wall Street veteran Paulson tocuhed off a populist revolt not only in the substance of what he proposed but also in the style in which he proposed it", Nina Easton at Fortune, 13 October 2008.
Unlike BS, I am not surprised at all. Read my 2 October 2008 post citing Vox Day. Unlike BS, I don't wonder "whose side government is on". It's been obvious for years. BS refers to an "axis"; is it the US answer to the "axis of evil"? Yes, "there is revolution in the air". One can almost smell the cordite. "Nero" Bush fiddles while his Republican constituency is sacrificed "on a cross of paper" to bail out the banks. Henry Paulson (HP), "formerly" of Goldman Sachs (GSG) will "understand the terror" if an American Robespierre appears on Wall Street with a few dozen stout ropes and horses, and HP sees peoples' Justice dispensed. The peasants contempt for the HP regime may soon equal HP's contempt for the peasants.
9 comments:
Of the richest in the US, most are democrats, so I would take the comment that this disaffection is coming from republicans with a great deal of skepticism. Take for example the richest parts of the SF Bay area and NYC are heavily democrat. A lot of them have moved to La Jolla.
Besides the idea that the republicans are disaffected conflicts with the recent study by Pew that pointed out that republicans by and larger are much happier people than democrats who tend to be angrier.
http://blogs.wsj.com/washwire/2008/10/24/republicans-dont-worry-be-happy/
The idea that simply because someone is rich, they must be republican, is a bit silly. I find Ben Stein an arrogant blowhard, and not one that understands republicans at all.
Now for Hank Paulson and the criticising him, coming from a democrat, not so much.
Frankly I do think that between street wise Paulson and academic Bernanke, I doubt anyone could field a better team to deal with this. How about Bill Ayers, and Larry Krugman? Not so much.
We are in a space where the wheels are coming off, and steering is pretty much ad hoc. It is doubtful that anyone can steer at this point, and if they try to change direction, we may go over the cliff.
I would love to see GSG trading positions.
If one reads Fishers Debt-Deflation theory one of the main components and recurring themes is growing pessimism and distrust. Each move to stop this is only making it worse throwing more money at it isn't going to fix it.
As for HP I think he knows exactly what he is doing and is well positioned to take advantage of that outcome along with his buddies.
Printfaster:
I agree the majority of the rich are Democrats. I see Stein as the girl with the curl right in the middle of her forehead, "When he's good ... ". I disagree with you about Zimbabwe Ben (ZB) and HP. Having followed HP's antics and now seen a 60-minute interview with him, I conclude, generously, he has a second-rate intellect. Two Ivy League degrees or no, he hasn't a clue what the problem is, nor how to fix it. HP only knows what's good for GSG. He apparently revised the child's dinner prayer to, "GSG is great, GSG is good. And I thank it for my food. Amen".
I never concluded Stein believes that the rich are all Republicans. I've followed Stein for about 20 years. He lives in Malibu, CA. Of all people, Stein would know the rich living along the CA coast are Democrats.
You write, "I doubt anyone could field a better team to dal with this". What does that mean? ZB is the proverbial man with a hammer in his hand, to him everything looks like an reason to print more money.
Anonymous:
You're entitled to your opinion about HP. I'm entitled not to share it.
Maybe the sweep of history is carrying the Bald and the Bearded quickly down a stream...
They cast ashore to those they know and the methods they are familar with.
For the Bald those methods are a corrupt and controlling striving to dominate economies and governments. It's shameful those actions... and the cronyism is unbelievable.
And the Bearded I just have pity for... I don't think he is malicious just confused... history will crucify him...
I'm not sure that the people understand enough to tip over the boat... unless... one leveraged MoveOn and the like... which is not necessarily a bad alliance or effort at education... because in the long run the dividends might be quite substantial... overcoming the global financial interests is an enormous feat.... even with Justice in hand.
Of course, I may be entirely wrong about all of this. And don't know CA or Ben Stein but NY is full of wealthy Democrats including the Clintons.
IA
Don't get me wrong about Paulson. I do not consider him a man of great integrity. I just see him as a street wise boy of Wall Street. And we all know that the streetwise look after their own interests first.
That said, in the past the Wall Street traders tried not to take too much, and would occasionally let an outsider get a good trade, the Wall Street Boyz are now getting a bit carried away with themselves.
I kind of see Hank like Al Capone. Someone that will bring a certain measure of order to a situation that may be well out of hand. Al always took his share. Al was not the brightest either.
I don't see Hank as the best, but he may be the best we can get in this situation. I will challenge back: Who would you get? Whoever it is, must be very dirty because he needs to know the insides of Wall Street, and that is a sewer. If he does not, then I would fear for him.
hello i.a.,
Very interesting, I will enjoy watching the next few years. The joys of living a simple life are a great comfort in times like these. I always said that when the revolution comes that I won't have to lift a finger, all I have to do is make sure that the masses are hurting before I am. Stupid peasants, I have as much contempt for them as HP does, but for different reasons.
Printfaster:
You liken Paulson to Al Capone. Were Paulson that smart, we would not be in this soup. You might read my posts of: 14 October and 4 December 2007 and 29 September 2008. Ben Stein likens GSG to the KGB. I apply the term "mafiozny", mafianess to GSG.
Who do I want as Treasury Secretary? No one who has ever worked one day on Wall Street! No one. We need someone who is not afraid to appear on Wall Street, draw his sixguns and fire away. At: Citigroup, GSG, Morgan Stanley and any and everyone else on the street. We need no one with "street cred". We need the street to be in ABSOLUTE TERROR of the new sheriff in town. We need someone who will ride herd on Mike Garcia and paraphrasing FDR, "We will indict and indict, and convict and convict and imprison and imprison". I see the situation as much more serious than you. I think we are living in a pre-revolutionary state like 1780s France; it's that serious. I said sheriff, come to "slay the Wall Street dragon", not defend it. Who? I'll do it. If he's interested, Jesse might do it. Mike Panzner might do it. But none of them has ever headed a Wall Street house. Precisely.
BS:
As long as you live at least ten miles outside of the city limits, have plenty of vegetables in your garden, some canned food, guns and ammo and gold and silver coins and reasonably honest neighbors, YOU SHOULD BE FINE. Relax and watch the chaos from afar.
IA
I see your view of the street. As far as a corrupt financial system, I am even looking out here at what formerly was a very well respected institution, World Savings, pretty much looted by the Sandlers, taking down Wachovia.
Where on earth do you find financial people who are not whores. Even the Swiss succumbed. I might try to say Deutsche or Dresdner, but I am not so sure that one of their execs could clean up the street. Getting someone who knows quickly there the levers are and the bodies are buried, will be difficult to find in a jam.
One of the main culprits as we have discussed are the feed schools for Wall Street: Wharton, Harvard, NYU. The culture there is remote and self-serving.
I still have no idea whom I would use to clean up the street. Everyone is simply too entwined.
One thing that I will remark on is that the notion of taxing 401Ks will leave a mark on the street and diminish a lot of their power and influence.
I guess the approach that I would take is to drain the swamp rather than chase alligators. I know that would not be environmentally correct, but it is what is needed. To drain the swamp, you have to kill the market for large amounts of government debt which is what Wall street depends upon and how the street controls government in return.
The big problem right now is the horrible consolidation of the banking system and its consolidation with investment banking. Best way to drain the swamp would be to return to a regional and local banking system and simply eliminate the federal reserve which was set up to market and monetize federal debt. I am OK with regional banking panics, but with FDIC oversight, nothing would propagate.
Many states for a long time banned branch banking to limit the sucking of capital from small towns to big cities, and we have gutted our local enterprise as a result of eliminating small banks.
There is simply too much money moving through NYC to be controllable. It is much like a rat infested building that can never be made habitable. The building is too big, has too many holes and too many rats. Any sheriff that shows up will get eaten by rats while he stands there.
The Germans have a way to deal with these transitions and they call it a "treuhand". It is like a trustee in the US but with more active responsibility. I would put a trustee over NYSE, NASDAQ, Citi, Morgan, and whatever large banks are left, and have them dispersed into new public firms, a fraction of their current sizes.
I guess that I would recruit trustees from various countries outside the US, such as Canada, Israel, UK, Germany, Norway, and Switzerland presuming of course that they could speak English. You really want a fresh look by someone who needs only to uphold their personal reputation, and who has experience in currency crisis or de-socialization.
I would not be putting public funds into any of these firms until there were disbanded and restarted. These midnight takeovers of Lehman and BS should have been done under a trustee, not under a Wall street firm. I see though where things appeared so desperate that Morgan needed the assets to stay afloat. Still I would have done a complete takeover under a trustee, not a midnight dismemberment.
So no sheriff please, but send in teams of exterminators.
Printfaster:
I have advocated repealing the Federal Reserve Act for 28 years.
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